by Timothy McQuiston Vermont Business Magazine In a sweeping report released today on the EB-5 immigrant investor program, the US General Accounting Office found that the outcomes of the program were “valid and reliable” and the foreign investors were not always fully vetted, all of which could lead to fraud in the popular economic development program. The EB-5 program most notably has been used in Vermont at Jay Peak Resort and related developments in Newport and Burke Mountain, at Trapp Family Lodge, Sugarbush and Mount Snow. The Securities & Exchange Commission is also looking into the Jay Peak developments (which include a hotel and the AnC Bio projects in Newport). Neither the Vermont regional office nor any of the projects located here was named in the GAO report.
US Senator Patrick Leahy (D-Vermont), a long-time champion of the EB-5 program, said in response to the report: "I have long supported the EB-5 Regional Center Program's ability to promote economic development and create jobs, and I have also sought important improvements to the program. The Department of Homeland Security needs additional authorities and enforcement tools to guard against fraud and abuse. And increased transparency and oversight are essential to instill confidence in the program.
"Today's report on the EB-5 program from the Government Accountability Office further confirms that such reforms are necessary. I am working with Senator Grassley to make these improvements. With the Regional Center Program's authorization set to lapse at the end of September, I hope that other members of Congress will join us to strengthen and reauthorize this program. I believe its proven ability to create jobs in areas that often struggle to obtain investment makes this program worth fixing.”
RELATED:
'Sunshine Stenger' Stays Optimistic Despite Mounting Troubles
$100 million EB-5 project AnC Bio breaks ground in Newport
The report said in part that USCIS’s (U.S. Citizenship and Immigration Services) methodology for reporting EB-5 Program outcomes and economic benefits is not valid and reliable because it may overstate or understate results in certain instances as it is based on the minimum program requirements for job creation and investment instead of the number of jobs and actual investment amounts investors report on EB-5 Program forms. To estimate job creation, USCIS multiplies the number of immigrant investors who have successfully completed the program with an approved Form I-829, by 10—the minimum job creation requirement per immigrant investor. To estimate overall investment in the economy, the agency multiplies the number of immigrant investors approved to participate in the program with an approved Form I-526, by $500,000—the minimum investment amount, assuming all investments were made for projects in a targeted employment area. Accordingly, USCIS reported that from program inception in fiscal year 1990 through fiscal year 2014, the EB-5 Program has created a minimum of 73,730 jobs and more than $11.2 billion in investments.
The EB-5 Program seeks to stimulate the economy by promoting job creation and encouraging capital investment by foreign investors in the United States. However, these features of the program that can provide economic benefit to the United States can also create unique fraud and national security risks that must be identified and addressed. Planning to conduct risk assessments on a more regular basis would better position USCIS to identify, evaluate, and address future and changing risks to the program. This may be of particular importance as USCIS is unable to comprehensively identify and address fraud trends across the program because of its reliance on paper-based documentation and because it faces certain limitations with using available data and with collecting additional data on EB-5 immigrant investors or investments. Developing a strategy to expand its data collection efforts, such as interviewing investors who apply to remove conditions on their permanent resident status and requesting additional information on applicant and petitioner forms, could better position USCIS to address these limitations.
USCIS’s ability to apply a valid and reliable methodology for reporting EB-5 Program outcomes and economic benefits is important for program accountability and to provide the public and Congress with more complete information to evaluate the program and make reauthorization decisions. Tracking and using more comprehensive information it collects on project investments and job creation on the Forms I-526 and I-829 submitted by immigrant investors and verified by USCIS would enable USCIS to more reliably report on EB-5 Program outcomes and economic benefits. Additionally, taking steps to ensure that the valuation it commissioned Commerce to conduct includes a discussion of the types of costs that should be considered, but could not be quantified by the study, would provide Congress and other stakeholders with more comprehensive information on the overall economic benefits of the program.
Recommendations
To strengthen USCIS’s EB-5 Program fraud prevention, detection, and mitigation capabilities, and to more accurately and comprehensively assess and report program outcomes and the overall economic benefits of the program, we recommend that the Director of USCIS take the following four actions:
• plan and conduct regular future fraud risk assessments of the EB-5 Program;
• develop a strategy to expand information collection, including considering the increased use of interviews at the I-829 phase as well as requiring the additional reporting of information in applicant and petitioner forms;
• track and report data that immigrant investors report, and the agency verifies on its program forms for total investments and jobs created through the EB-5 Program; and
• include a discussion of the types and reasons any relevant program costs were excluded from the Commerce study of the EB-5 Program.
Agency Comment
With regard to the first recommendation, that USCIS plan and conduct regular future fraud risk assessments of the EB-5 Program, DHS (Department of Homeland Security) concurred, stating that the EB-5 Branch of USCIS’s FDNS will continue to conduct a minimum of one fraud, national security, or intelligence assessment on an aspect of the program annually, as it has done since 2012. DHS further requested that GAO consider this recommendation resolved and closed. While we believe that planning to continue conducting a minimum of one assessment on an aspect of the program annually is a positive step, to fully address the intent of our recommendation, USCIS needs to conduct at least one review, as planned. Thus, we continue to consider this recommendation open.
With regard to the second recommendation, that USCIS develop a strategy to expand information collection, including considering the increased use of interviews at the I-829 phase as well as requiring the additional reporting of information in applicant and petitioner forms, DHS concurred and estimated that actions to develop such a strategy would be completed by September 30, 2016. Upon completion of the strategy, these actions should address the intent of the recommendation to strengthen USCIS’s ability to prevent, detect, and mitigate fraud in the EB-5 Program.
With regard to the third recommendation, that USCIS track and report data that immigrant investors report, and the agency verifies on its program forms for total investments and jobs created through the EB-5 Program, DHS concurred and estimated that a plan to collect and aggregate additional data, including revisions to USCIS data systems and processes, would be completed by September 30, 2016. When USCIS implements this plan, this action should address the intent of the recommendation to more comprehensively assess and report program outcomes of the EB-5 Program.
With regard to the fourth recommendation, that USCIS include a discussion of the types and reasons any relevant program costs were excluded from the Commerce study of the EB-5 Program, DHS concurred and said that USCIS IPO will recommend to Commerce that a description of potential costs not assessed as a part of the study be included when the study is published later this year. Should Commerce include such a discussion of relevant program costs in its study that USCIS estimates will be completed November 30, 2015, this action should address the intent of our recommendation to more comprehensively assess and report the overall economic benefits of the EB-5 Program.
VERY TOP PHOTO: The Tram Haus Lodge at Jay Peak was an EB-5 funded project. Vermont Business Magazine